Rate Hike Possibilities Causing Jitteriness till the Final Announcement

When interest rates go up, bond prices go down.

The second notification will be a second gut shot when your credit card companies notify you that your rates will increase.

Mostly by ending its asset purchase program. Mortgage rates have fluctuated up and down daily as different players jockey for positions in the markets. But those investors will be rewarded over time as funds reinvest their money at higher interest rates. On Friday, the Dow Jones industrial average fell 309.54 points, or 1.76 percent, to 17,265.21, with every component in the index ending down. If the Fed does raise rates, it would be the first change in the Fed’s borrowing costs since it was cut to zero percent eight years ago.

– December rate hike practically a lock since the November NFP release.

But after the rough ride markets have had over the past year, one quarter-point rate hike is nothing to fear. But if an overheated economy is being cooled down by increased interest rates, stocks go down before they rebound. You’ll still collect interest, though at a lower rate than you would on newer-issue bonds. If rates stay near their historic lows, many prospective buyers will realize that they still can afford a new home and will buy one, anyway. According to this argument, inflation has remained low precisely because interest rates have been held artificially low for too long, deterring investment in the real economy and instead promoting excessive risk taking in financial markets.

As it happens, I doubt very much that this week’s interest rate rise will have much adverse effect around the world. At each meeting in 2015 featuring updated Staff Economic Projections – which this meeting will feature – lowered expectations for the path of future rates. The Fed has been signaling the move for weeks. “If it impacts spending, it would be really small”.

“There are some pretty widely varying views on whether the Fed is ahead or behind the curve and whether inflation is going to pick up very quickly”, said Michael Hanson, senior economist at Bank of America Corp.in NY. Investors will probably need to hunt for higher yields.

It’s a bit unusual then, that this Wednesday will see arguably the most significant economic event of the year. The dollar index was up about 0.1 percent at 98.056.

“The Fed chair earlier emphasized that the rate hike will be carried out slowly”.

Shaw said it was likely that the UK’s first rate rise since the financial crash would take place next summer, but several analysts have argued that low inflation and tepid growth will prevent the Bank of England from following the Fed until late next year. A message of gradual hikes also should mollify pro-growth Fed policymakers anxious that acting this week poses risks to the recovery.

“Don’t let anyone scare you”, said Moisand, who also is a regular columnist for FLORIDA TODAY”. It expects the USA economic expansion to continue, but only at a 2 percent annual rate over the next few years. It’s just the Fed that needs to get the confidence to move.

Both strategists predict interest rates will rise starting this month. But fund managers will begin to buy higher yielding bonds, which might help soften the blow. “The effect on shorter term, high-quality bonds should be minor”. “Nobody is going to downsize from an SUV to a compact on rising rates”.

“From an investment standpoint, if the size and timing of an increase is critical to you, you may not be truly investing”, Moisand said.